Digital Sales Expectations: Customer vs. Copyright Holder

Let’s talk more about digital distribution. I don’t know why but I suddenly have a lot to say about these things. We already established that distributing data online can be profitable if you approach it the right way. We also know that so far very few industries have learned how to do it. Even book publishers who have a built in advantage (most modern e-book readers suck) are very uneasy about electronic distribution. No one can really figure out how to deal with this internet debacle. And I think part of the problem stems from the big dissonance between what customers desire, and what distributors are willing to provide.

It’s actually really easy to figure out what consumers want. As with any other product that is easy to find, high quality affordable, accessible and easy to consume. What does that mean? Let’s say that Joe Public wants to buy a song he heard on the radio. He should be able to find it in his favorite music store by searching by title, band or lyrics. He should be able to buy that song for an iTunes range price or lower (this stuff should be competitive) and download it immediately without jumping through any hoops. Just pay with paypal/credit card, and download.

The music should be accessible and easy to consume. This means that Joe should be able to click on the song and have it open in the music player of his choice. He should not need to use some bloated, proprietary player. He should not need to activate it, wait for it to fetch a license from the online store, or provide login or license number information. All Joe really wants is to take that song, play it on his computer, then put it on his ipod/iphone, his laptop, an his work computer. In this day and age it is not uncommon for people to own and use several different machines on a daily basis like that.

Is it really that much to ask? All we really want is a file that is in some standard format can be played on any device and any operating system without any major hassle, or need for internet access. But to music industry this is an outrageous. If I pitched this idea to the RIAA folks they would probably call me a raving lunatic who tries to ruin them and then phone for security and have me escorted out of the building.

Here is a pitch that would make them cream their pants on the spot:

First, music should only be sold via a single online store. It needs to be withdrawn from iTunes and all other online distributors. This will help increase the artificial scarcity of the song, and also add another revenue stream as the store will be able to serve advertising to the shoppers. Next, we remove all the search boxes from the online store. Instead we have a list of categories, and alphabetized list of performers. To find the song he wants, Joe Public will need to drill down 6 or 7 levels into that category tree generating page views for our banners, and popup advertising.

Then, before Joe can place the order and download his song we make him click through 10 to 20 special offers from “our affiliates”. Once the credit card payment is in, we make Joe install a custom downloader software that will fetch the song from our server for him. Naturally the software comes bundled with more special offers and addware. Once he installs the software, he will be able to download the song, which will be in proprietary format that can only be played by our custom music player (with more addware).

The song will naturally be tied to the hardware signature of Joes computer as soon as it is downloaded (long before he even tries to play it). To listen to it, Joe must use the cutom player, provide his login information, and the license code for the song that was sent to him in his email. The player will then call home and confirm the license and increment the play counter by one. Joes card will be charged some nominal sum for each play. It’s probably a good time to note that the custom player has no pause button or any way to fast forward or rewind the song. Ever time you play it, you get charged. The song will expire after 24 plays or 24 hours whichever comes first. After this time Joe will be able to re-purchase it for the full price.

Naturally, even the slowest, least progressive RIAA members realize that such an atrocious, anti-customer model would fail miserably. No one in their right mind would ever agree to a pay-for-play scheme – especially not when iTunes provides a much more user friendly and affordable, while still locked down service. This is why most studios hates iTunes with a passion – because they made digital distribution work without really squeezing the customers that much. Let’s face it, once you subtract bandwidth costs and maintenance of the online store, any profits on top of that are essentially free money.

So there is this huge gap between expectations on each side. Customers just want an affordable product they could use. Copyright holders want an unusable product which forces the customers to hand over large sums of money to them. It’s obvious that some sort of compromise must be worked out. If your digital distribution model is to restrictive or unfriendly, the customers will just happily continue pirating your content. If it is to lenient, you will probably get fired because your boss will not be able to sleep for months, thinking about the millions of dollars he probably lost because your scheme allowed someone to play the song on 3 computers instead of just one.

This is entirely silly since all you need to do to make profit is to capitalize on some of Kevin Kelly’s generatives. You can sell un-protected, un-encrypted mp3’s and still turn profit. Apple actually gets it and the reason why they are so successful is that they are really exploiting these things. First, they heavily rely on the brand. Their music store is closely associated with their flagship product – the iPod. Apple is a trustworthy brand with a carefully cultivated image. This is one intrinsic value that cannot be digitized and downloaded from a torrent site. People trust Apple more than they trust the “Pirate Bay” or other strangely named site like that. Second, the iTunes store really capitalizes on several of the generatives. It has an impressive searchable index, keeps track of your music and makes it accessible to you wherever. Naturally they also compromised and have that DRM of theirs which doesn’t really do anything other than annoy customers. But in the current climate it is necessary – no DRM, no content is the mantra of the entertainment industry.

Theoretically, if someone came along with a similarly sized catalog of content, but offered lower prices and no DRM they could blow iTunes out of the water. There are two problems though – iTunes is an entrenched brand, and it would be hard for a no-name service to compete, at least initially. They’d really have to provide a better service – and not just slightly – they would have to catch the eye of the public. The second problem is that without DRM they would have real trouble getting licenses for distributing content. They’d probably get enough content to be attractive to some, but not enough to threaten iTunes using their music catalog.

So we are really at an impasse. The copyright holders desperately try to shift the market towards a model that is more restrictive, and more prone to milking than iTunes. Customers just want something that works, and doesn’t cost an arm and a leg. Unless the copyright holder mindset doesn’t change, we will continue getting shafted with horrible deals, atrocious DRM and business models that just can’t work.

We will probably continue arguing over this for years to come, but I think customers will win in the end. It’s already slowly changing for the better as new DRM-less schemes are popping up now and again. People are starting to realize that customer lockdown is a dead end. It will get better, eventually…

[tags]copyright, copyright holders, itunes, music, downloading, copyfight[/tags]